Powell dove
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I wrote yesterday about a small detail in the dot plot that might be ignored in the initial move but will have some larger repercussions. Beyond that, I expect the dot plot is going to be an overrated part of the equation when the Federal Reserve meets tomorrow.

That's natural because it's one tangible number the market can latch onto -- 50 or 75 bps in cuts this year.

What it ignores is that most Federal Reserve members don't know what they will do next. Virtually all of them have pledged to go where the data takes them and no one has ruled out cutting rates at any point.

What I will be looking for, and what the market will ultimately focus on, are indications from Powell about how willing and eager he is to cut rates if/when the data begins to deteriorate.

We will be gauging that based on how his comments change compared to what he said two weeks ago at Humprey Hawkins. At the time, eh said he wants to see "a little bit more data" to become confident about inflation. He said it didn't need to improve but that he wanted to see similar types of inflation readings to what have been coming in -- more of the same.

Powell also said the number of cuts this year will depend on the economy.

If Powell simply repeats that, it will be dovish. The market right now is pricing in just a 64% chance of a June cut and a comment like that would sound more like teeing up a June cut. At the same time, I'll be looking for nuance because he could also highlight a path where they cut in June and then remain on pause until December or longer.

Getting back to the trade, the latest adage is to "sell the statement, buy the presser" and that could very well be the trade for equities and bonds (the opposite for the dollar). Powell has repeatedly surprised the market for the past eight months by being more dovish, I wouldn't bet against that based on two months of quirky CPI data.

See also: The dot plot is overrated but even the minute details will matter this time